Jet2 plc

Interim Results

Jet2 plc , the Leisure Travel group (“the Group” or “the Company”), announces its unaudited interim results for the half year ended 30 September 2022.

Group financial highlights	Half year ended30 September2022Unaudited	Half year ended30 September2021Unaudited	Half year endchange	Half year ended30 September2019Unaudited
Revenue	£3,567.6m	£429.6m	730%	£2,615.2m
Operating profit / (loss)	£516.6m	(£170.4m)	403%	£365.0m
Profit / (loss) before FX revaluation and taxation*	£505.0m	(£195.1m)	359%	£349.8m
Profit / (loss) before taxation	£450.7m	(£205.8m)	319%	£339.7m
Profit / (loss) for the period after taxation	£356.0m	(£163.5m)	318%	£278.6m
Basic earnings per share	165.9p	(76.2p)	318%	187.0p
Interim dividend per share	3.0p	–	100%	3.0p

* Further information on the calculation of this measure can be found in Note 4.

·	Despite a difficult return to normal operations, Group profit before foreign exchange revaluation and taxation increased to £505.0m (2021: £195.1m loss), which was also 44% ahead of the 2019 pre-Covid performance. Total profit for the period after taxation was £356.0m (2021: £163.5m loss).
·	Seat capacity increased 14% against Summer 2019 and buoyant customer demand resulted in the business achieving an average load factor of 90.7% (2019: 93.1%). Higher margin Package Holiday customers mix of total departing passengers was 65.9%, up 13.1ppts against Summer 2019 (2019: 52.8%).
·	Flight-only ticket yield per passenger sector at £105.00 (2021: £73.27) was 43% higher than the prior period, due to changes in the mix of destinations flown, notably to those in the Eastern Mediterranean, and strong consumer demand meaning fewer promotional offers were required.
·	Our operations were directly impacted by the broader disruption seen across the aviation sector and its supply chains in mid-summer as was widely reported in the media, which has resulted in significant delay and compensation costs in excess of £50.0m.
·	Overall liquidity improved significantly with a total cash balance (including money market deposits) at the half year end of £2,830.7m, an increase of 39% (2021: £2,036.9m). Our ‘Own Cash’ position (excluding customer deposits) of £1,968.6m increased 29% (2021: £1,524.3m).
·	In mid-October 2022, we were delighted to announce that we had entered into an agreement to purchase a further 35 new firm ordered Airbus A320/A321 neo aircraft with the ability to extend up to 71 aircraft. With its previous orders, the Group now has a total of 98 firm ordered Airbus A320/A321 neo aircraft, which could eventually extend up to 146 aircraft, and critically has certainty of supply well into the next decade.
·	With Winter 2022/23 bookings encouraging and pricing remaining robust, but recognising that the important post-Christmas booking period is still to come, we are presently on track to exceed current average market expectations for Group profit before FX revaluation and taxation for the year ending 31 March 2023.
·	Looking ahead, the Group faces input cost pressures including fuel, carbon, a strengthened US dollar and wage increases, plus investment to ensure our Colleagues can thrive and have a balanced lifestyle, further underpinning our operational resilience. This leads us to conclude that margins may come under some pressure.
·	The Right Product for Tougher Times – our well-established truly variable duration holidays and wide ranging product portfolio will provide customers with plenty of choice and flexibility to be able to tailor their holiday plans to meet their individual budgets. As a result, we remain confident that our Customers’ eagerness to take their much valued and anticipated holidays will remain high.

Chairman’s Statement

I am pleased to report on the Group’s trading for the half year ended 30 September 2022, which encompasses Jet2holidays, our acclaimed ATOL licensed package holidays provider, and Jet2.com, our award-winning leisure airline.

Results for the half year

Despite a difficult return to normal operations, primarily due to the lack of planning and preparedness of many airports and associated suppliers, and having absorbed substantial associated disruption costs, Group profit before foreign exchange revaluation and taxation increased to £505.0m (2021: £195.1m loss), which was also 44% ahead of the 2019 pre-Covid performance. Total profit for the period after taxation was £356.0m (2021: £163.5m loss).

Our Leisure Travel business has continued its encouraging recovery following the reopening of international travel in early 2022. Strong customer demand, in particular for package holidays, plus a robust pricing environment and considered cost control, have underpinned a substantially improved financial performance compared to recent Covid impacted summer seasons, but also against pre-Covid Summer 2019.

The business made considerable investment well ahead of Summer 2022, retaining over 8,000 loyal colleagues throughout the pandemic and significantly topping up the Coronavirus Job Retention Scheme funding on a sliding scale basis up to 100% of salary for the lowest paid, recruiting and training seasonal colleagues in good time, making substantial marketing investments, plus early and meaningful salary increases for all colleagues. This left us very well prepared for our summer operation and also enabled Jet2.com to earn the accolade of being the only UK airline not to cancel a flight during July and August 2022, according to leading travel intelligence company, OAG.

For the reporting period, seat capacity increased 14% against Summer 2019 and buoyant customer demand resulted in the business achieving an average load factor of 90.7% (2019: 93.1%), with package holiday customers displaying a materially higher mix of the total departing passengers at 65.9%, up 13.1ppts against Summer 2019 (2019: 52.8%).

Despite our Colleagues working incredibly hard and consistently going the extra mile to take our Customers on their long-awaited holidays, unfortunately some customers still faced frustrating delays as our operations were directly impacted by the broader disruption seen across the aviation sector and its supply chains as was widely reported in the media. Regrettably, this resulted in Jet2 incurring delay, compensation and customer expenses reimbursement costs in excess of £50.0m under UK (EU) Regulation 261/2004 (“EU261/2004”) which was materially higher than in Summer 2019.

In addition, our inflight retail financial performance was weaker than expected, due to product supply chain issues early in the summer season, plus poor onboard product availability caused by resource constraints at our third party inflight retail provider.

Given these very challenging circumstances, the Board is hugely appreciative of all our Colleagues’ tremendous efforts and support over recent months.

As is typical for the business, losses are to be expected in the second half of the financial year, as we continue to invest in: additional aircraft; marketing to ensure we optimise our pre-Summer 2023 forward booking position; retaining increasing numbers of colleagues through the winter months to ensure maximum operational resilience ahead of next summer; and attracting new colleagues in readiness for further expansion of our exciting package holiday and flight-only offerings for Summer 2023, in line with our planned growth targets.

Interim Dividend

Basic earnings per share increased to 165.9p (2021: (76.2p)) and in view of the current full year outlook, the Board has decided to pay an interim dividend of 3.0p per share (2021: £nil). The dividend will be paid on 3 February 2023 to shareholders on the register at 30 December 2022, with the ex-dividend date being 29 December 2022.

Sustainability

The Group continued to implement its Sustainability Strategy with the vision to become “the leading brand in sustainable air travel and package holidays“. All of our airline emissions not already covered by mandatory carbon pricing mechanisms, namely the UK and EU Emissions Trading Schemes (ETS), have been offset during the period. In addition, the Group is actively negotiating access to Sustainable Aviation Fuel through various channels. More detailed information on the Group’s Sustainability Strategy can be found at www.jet2plc.com/sustainability .

Post reporting date events

The strength of our recovery post Covid reinforces our view that we have a great future in the leisure travel industry. Consequently, we were delighted to announce in mid-October 2022 that we were building upon our previous aircraft order with Airbus of up to 75 A321 neo aircraft (63 now firm ordered) and entering into an agreement to purchase a further 35 new firm ordered Airbus A320/A321 neo aircraft with the ability for this to extend up to 71 aircraft. The A321 neo aircraft provides additional environmental and operating benefits through lower fuel consumption per passenger and therefore lower emissions and is, in our opinion, on a per passenger basis, the most fuel efficient and sustainable aircraft in its class today. In addition, this latest order further supports our determination to sustainably grow our successful business and expand our fleet in line with the demand for our award‐winning package holidays and flights, whilst also giving the ability to retire less efficient earlier aircraft models.

These latest firm ordered aircraft deliveries stretch over three years until 2031, and at base price represent a total value of approximately $3.9 billion, with a total transaction value for up to 71 aircraft of approximately $8.0 billion, though the Company has negotiated significant discounts from the base price.

The Group now has 98 firm ordered Airbus A320/A321 neo aircraft, which could eventually extend up to 146 aircraft and critically has certainty of supply well into the next decade. The Company will retain flexibility in determining the most favourable method of financing the aircraft, which will be through a combination of internal resources and debt.

Outlook – The Right Product for Tougher Times

With Winter 2022/23 bookings encouraging and pricing remaining robust, but recognising that the important post-Christmas booking period is still to come, we are presently on track to exceed current average market expectations for Group profit before FX revaluation and taxation for the year ending 31 March 2023.

Looking ahead, current seat capacity for Summer 2023 is approximately 5% higher than Summer 2022 (and approximately 20% higher than Summer 2019) with bookings at this very early stage encouraging, average load factors broadly in line with Summer 2019 at the same point and pricing strong.

However, the Group faces input cost pressures including fuel, carbon, a strengthened US dollar and wage increases, plus investment to ensure our Colleagues can thrive and have a balanced lifestyle, further underpinning our operational resilience. This leads us to conclude that margins may come under some pressure, but encouragingly the strength of our recovery post Covid underlines our belief that customers truly cherish their weeks away in the sun and want to be properly looked after throughout their holiday experience.

Our ‘Customer First’ ethos runs deep throughout our company culture with ‘People, Service, Profits’ our guiding principles – great and attentive service is where we excel. In addition, our well-established truly variable duration holidays and wide ranging product portfolio which includes the All Inclusive Package – all in cost certainty and a wonderful product for challenging economic times – will provide customers with plenty of choice and flexibility to be able to tailor their holiday plans to meet their individual budgets. As a result, we remain confident that our Customers’ eagerness to take their much valued and anticipated holidays will remain high.

Our long-term ambition remains to be the UK’s Leading and Best Leisure Travel business . W ith our customer focused approach and Right Product for these Tougher Times, we are confident that as a financially strong and much trusted holiday provider, our Customers will continue to be keen to travel with us from our Rainy Island, to the sun spots of the Mediterranean, the Canary Islands and to European Leisure Cities.

Philip Meeson

Executive Chairman

24 November 2022

Business and Financial Performance

Customer Demand & Revenue

Following the reopening of international travel in early 2022, our Leisure Travel business has been able to operate to all its popular high-volume leisure destinations allowing us to provide our Customers with their well-deserved and eagerly anticipated Real Package Holidays from Jet2holidays®.

Overall bookings, though a little later than normal, remained consistently strong. As a result, passenger numbers for the period increased by 632% to 11.20m (2021: 1.53m), with customers choosing our end-to-end package holiday product rising 755% to 3.76m (2021: 0.44m) and single sector passengers choosing our flight-only product growing by 431% to 3.82m (2021: 0.72m). Consequently, higher margin package holiday customers represented 65.9% of overall flown passengers (2021: 53.0%).

Pleasingly, average load factor achieved was 90.7% (2021: 57.3%) on a 361% increase in seat capacity to 12.35m (2021: 2.68m), underlining the popularity of our leisure travel product and the resurgence in consumer confidence to travel.

Flight-only ticket yield per passenger sector at £105.00 (2021: £73.27) was 43% higher than the prior year, due to changes in the mix of destinations flown, notably an increase to those in the Eastern Mediterranean, and strong consumer demand meaning fewer promotional offers were required.

The average price of a Jet2holidays package holiday increased 5% to £782 (2021: £748) reflecting inflationary increases in costs and favourable pricing driven by destination mix and robust consumer demand.

Non-Ticket Retail Revenue per passenger sector declined 17% to £25.79 (2021: £30.97) primarily due to early season product supply chain issues and resource constraints at Jet2.com‘s third party in-flight retail supplier which affected onboard product availability and consequently impacted in-flight retail revenues. Pleasingly, as we enter the Winter 2022/23 season this disruption has largely abated, and availability levels are now approaching the high standards our customers have come to expect and enjoy.

As a result, overall Group Revenue increased 730% to £3,567.6m (2021: £429.6m).

Net Operating Expenses

Higher levels of flying activity resulted in an associated 536% increase in direct operating expenses (including direct staff costs) to £2,654.9m (2021: £417.2m), significantly lower than the revenue growth, this despite the severe operational disruption experienced in mid-summer 2022 due to the lack of planning and investment by many airports and associated suppliers. This disruption caused flight delays in excess of three hours deemed eligible under EU261/2004, to be over 700% higher than 2019 and has resulted in significant delay and compensation costs in excess of £50.0m.

Further, £108.0m was invested in brand and direct marketing activity as the business ramped up operations post-pandemic and sought to optimise load factors for Summer 2022 and drive customer bookings for Winter 2022/23 and Summer 2023.

As a result, net operating expenses in total increased by 409% to £3,051.0m (2021: £600.0m).

Operating Profit

Overall Group operating profit was £516.6m (2021: £170.4m loss) which was also 42% ahead of 2019.

Net Financing Expense

Net financing expense (excluding Net FX revaluation losses) decreased by £13.2m to £12.1m (2021: £25.3m), with additional interest incurred on the £387.4m convertible bond issuance and £150.0m term loan, more than offset by finance income earned on the Group’s higher average cash balances, which was further boosted by recent interest rate increases.

Group profit before foreign exchange revaluation & taxation

As a result, Group profit before foreign exchange revaluation and taxation increased to £505.0m (2021: £195.1m loss), which was also 44% ahead of 2019. Total profit for the period after taxation was £356.0m (2021: £163.5m loss).

Cash Flow & Liquidity

In the first half of the financial year, the Group generated cash from operating activities of £787.0m (2021: £248.4m) , primarily a result of significantly improved EBITDA together with working capital benefits from the increased operational activity.

Capital expenditure of £65.3m (2021: £60.6m) reflected pre-delivery payments made for the Group’s Airbus A321 neo order, plus continued investment in the long-term maintenance of our existing aircraft fleet. The investment in the electrification of ground services equipment and other vehicles continues apace, as older less efficient models reach the end of their useful lives. In addition, as a consequence of our recent aircraft orders and to further underpin our growth ambitions, we took the opportunity to purchase premises at Cheadle, near Manchester Airport, which will become our second flight simulator training centre, building on the success of our first facility near Bradford which commenced operation in 2014. This new centre will provide a bespoke training facility for pilots, engineers and cabin crew and will continue to equip us with well-trained colleagues as we grow over the coming years. 

Net cash used in financing activities was £138.7m (2021: £467.8m net cash generated), which included repayment of the existing £65.0m Revolving Credit Facility.

As a result, overall liquidity improved significantly with a total cash balance (including money market deposits) at the half year end of £2,830.7m, an increase of 39% (2021: £2,036.9m). Our ‘Own Cash’ position (excluding customer deposits) of £1,968.6m increased by 29% (2021: £1,524.3m).

Renegotiation of Revolving Credit Facility Agreement (“RCF”)

Since the half year end, the Group has successfully renegotiated its RCF, welcoming one new financing partner, National Westminster Bank plc, alongside our three existing supportive relationship banks: Barclays Bank plc; HSBC UK Bank plc; and Lloyds Bank plc. The new RCF provides the Group with unsecured available facilities of up to £300m, an increase of £200m on its previous RCF. On signature and having considered the Group’s current liquidity position and medium-term liquidity requirements, the Board decided to repay in full the Group’s £150.0m term loan, which was due to mature in September 2023, with the new RCF remaining undrawn. Importantly, the new RCF will be sustainability-linked from April 2023, incorporating the Group’s key climate metric – gCO₂ per passenger km aircraft fuel burn.

The strength of our balance sheet means the Group is well positioned to capitalise on the growth opportunities that we believe exist for our exciting business and also provides it with necessary financial resilience should circumstances become more challenging.

Key Performance Indicators	Half year ended30 September 2022	Half year ended30 September 2021	Half year end change	Half year ended30 September 2019
Leisure Travel sector seats available (capacity)	12.35m	2.68m	361%	10.82m
Leisure Travel passenger sectors flown	11.20m	1.53m	632%	10.07m
Leisure Travel average load factor	90.7%	57.3%	33.4ppts	93.1%
Flight-only passenger sectors flown	3.82m	0.72m	431%	4.75m
Package holiday customers	3.76m	0.44m	755%	2.71m
Package holiday customers % of total passenger sectors flown	65.9%	53.0%	12.9ppts	52.8%
Flight-only ticket yield per passenger sector (excl. taxes)	£105.00	£73.27	43%	£88.87
Average package holiday price	£782	£748	5%	£702
Non-ticket revenue per passenger sector	£25.79	£30.97	(17%)	£24.62
Advance sales made as at 30 September	£1,665.5m	£1,311.9m	27%	£1,206.3m

Certain information contained in this announcement would have been deemed inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time, until the release of this announcement.

For further information, please contact:

Jet2 plcPhilip Meeson, Executive Chairman	Tel: 0113 239 7692
Gary Brown, Group Chief Financial Officer
Cenkos Securities plcNominated AdviserKaty Birkin / Camilla Hume	Tel: 020 7397 8900
Canaccord Genuity LimitedJoint BrokerAdam James	Tel: 020 7523 8000
Jefferies International LimitedJoint BrokerEd Matthews	Tel: 020 7029 8000
BuchananFinancial PRRichard Oldworth / Toto Berger	Tel: 020 7466 5000